Greystone’s Mordecai Rosenberg Talks Technology and FHA Lending

Mordecai Rosenberg, an executive vice president and managing director at Greystone and head of the firm’s Federal Housing Administration lending group, has placed an increasing focus on technology. When Rosenberg—who is the son of Greystone Founder Stephen Rosenberg—assumed his current role as head of FHA lending nearly a year and a half ago, he saw an opportunity to cut down what has historically been a very lengthy underwriting process. He sat with Commercial Observer in Greystone’s West 57th Street, Carnegie Hall Tower office, and discussed the process of creating the software as well as the results his team of roughly 80 has seen thus far.

Rosenberg: Greystone was founded by my father in Atlanta, so the talk around the dinner table was always about transactions and interesting initiatives that were happening. We got a mini-MBA just over the weekends. I went to University of Pennsylvania for college—I did an internship at a commercial mortgage-backed securities shop while I was there and really liked it. After college, [in 2003], I came to Greystone to work in the real estate division, started as an analyst and moved into sales after about a year. I think I was here for four years, and then I wanted to get some more affordable housing financing expertise, so I went to another firm called Red Stone Partners for two years and then came back here to start a sales team with my brother, Donny [Rosenberg], who was starting at the same time. We grew that sales team, and over the next five years we closed about $3 billion in transactions.

How have your responsibilities changed since you assumed your current role?

Moving into this position from sales—and I was doing sales for 11 years before—gave me a totally different perspective on the business and enabled me to see opportunities for growth and areas to distinguish ourselves from the competition. One thing I recognized was that so much of the world has changed just over the last five years—in commercial real estate finance in general and certainly with FHA. I believe that we can create a product and process that is just a lot more user-friendly and a lot faster, so what we’ve really been focused on is refining our processes and investing in technology, with the overarching goal of being the easiest lender in the country to work with and the easiest lender in the country to work for. There’s so much that we can’t control—we can’t control interest rates, we can’t control the real estate market—but what we can control is what happens when the ball is in our court, when we’re actually doing the underwriting.

Just over the last 18 months we were able to take our underwriting time from 120 to 150 days down to 60. We created our own proprietary deal management and underwriting software to automate more of the process and [made it] accessible on a cloud so that you don’t have to be plugged in to keep a deal moving forward. We also created a client-facing app, which enables the client to very easily upload documents, see where they are in the process, and we’re going to keep building on that with every step.

What feedback are you getting from clients and employees?

First of all, I think we’re unique in the industry in that we created a dedicated technology group in the FHA platform. The reason we did that was because we wanted the development of these technologies to really take into account the needs of the team and the needs of our clients. The only way to do that is to be in the weeds with them as it’s being designed. Every step was designed with direct feedback from our underwriters, project managers and clients. The nice thing is that when we did launch [the software], people saw their fingerprints on it. That’s really helped because we built exactly what people were asking for. As a foundation, we think that’s great, and we’re not stopping there.

Now that you’ve been able to minimize the amount of time to transact, are you seeing more business coming in?

I think it’s too early to say that we’re seeing increased business. What we’re hearing, from potential clients as well as prospective hires, is that it’s really singular in the industry, and they are really excited about that effort.

What’s the average deal size within your FHA lending platform?

The average loan size across our pipeline is about $15 million. The new construction projects tend to be larger because it’s just more expensive to build. In terms of our production, we did about $1.35 billion in 2014, $1.25 billion last year and this year we expect to be about flat to last year. In terms of our current pipeline, we’ve got about $2.5 billion in various stages of underwriting through closing. With FHA, there is a longer lead time to closing these deals, so some of that business will roll over in 2017. But the pipeline is pretty robust right now.

Health care financing has been climbing. Are you doing a lot in with that property type?

In the health care space, FHA plays an even more critical role because there are fewer available capital sources. For multifamily you have CMBS, you have life companies, you have every bank. For a nursing home or a hospital, CMBS won’t finance it, life companies won’t finance it and a lot of banks just don’t have that expertise. As far as long-term, permanent financing, I think FHA is really almost the only option.

There’s been a lot of acquisition activity in that space, similar to multifamily, so a lot of what we’re doing is bridge-to-HUD [Housing and Urban Development] loans. Because of the time frames to close a FHA loan, you can’t really use it for an acquisition. We’re funding bridge loans off of our balance sheet to enable the clients to acquire the facilities, and then after that we’ll take them to HUD afterwards. We’ve seen a lot of activity there.